What’s the saying? Can’t get blood from a turnip? Today’s restaurant patrons are certainly an example of this. There is only so much wiggle room in their Discretionary Income and this results in a decreasing basket size and check.
Based on our most recent QSR sales and traffic data, we can tell from the decrease in traffic and basket size that we are at an inflationary tipping point. In our April 2022 Monthly Industry Impact Report, QSR US sales were flat at 0.2% in the first quarter of 2022 compared to the same quarter last year.
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Our data shows that QSRs have struggled to regain traffic since the second half of 2021. And as we look back to the first quarter of 2022, we see QSR performance continuing to slow. In March 2022, traffic was down -8.5% compared to March 2021. For the quarter, traffic was down -6.3%.
When we look at traffic by slice of the day, lunch and dinner are down about -3%. Even breakfast, which tended to increase throughout 2021, began to decline, with annual traffic down -0.4% in the first three months of 2022.
During pre-vaccination days and pandemic stimulus payments, checks were larger thanks to consumers placing large orders. In a consumer survey we conducted in Q4 2021, 86% of respondents reported at least one weekly drive-through visit. In the first quarter of 2022, this figure fell to 80%.
Interestingly, our most recent Q1 2022 data tells us that the average check continues to rise; however, what is changing is the number of items per transaction, which decreased by 3.1%. Customers have warned us. Going back to the Q1 consumer outlook survey, only 16% of respondents then said they planned to order “more or a lot more” from a drive-thru in the future. In Q4 2021, 23% said they planned to order more.
The Internet? When the average check goes up but the basket size (the number of items per order) goes down, it’s a strong indicator that consumers aren’t getting ready to tighten their belts, they’re already doing it.
The market is volatile, but one thing is clear. We are officially in a down trading environment. The question then becomes, what can QSRs do to avoid customer swapping?
How QSRs can avoid customer back-and-forths
RMS Senior Vice President of Advisory Strategies Richard Delvallée shares these tips for QSRs to avoid trades while increasing inflation.
Consider item-level pricing strategies rather than general price increases. By increasing in small increments over an extended period, traders can manage price sensitivity.
Watch for changes in the following data:
- Impact/units per transaction (UPT)/demand per item in each menu category. When customers question their checks, they skip appetizers or swap within a menu category, for example, ordering a sirloin instead of a rib eye.
- The additional attachment rate tells operators what is NOT on the check. Monitor the percentages of alcoholic beverages, appetizers and desserts sold per transaction. If the percentages drop, customers are in check management mode.
By understanding trade details, traders can use menu engineering to avoid trades and maintain margins. In the steak example, we might recommend finding a cheaper substitute for rib eye that is more cost effective than sirloin.
If add-ons are dwindling rapidly, carriers may consider creating a bundle containing these items. Finding a way to sell items such as liquor, salads, or desserts can offer a higher average check.
Consider the value equation
While inflation can drive customers away, a bad experience exacerbates the problem. Keep your entire operation engaged and involved to avoid some common customer irritants. Since consumers think twice before eating out (at least for now), don’t give them a reason to go elsewhere because of a bad experience.
Longer wait times cause dissatisfaction. By integrating technology, like loyalty programs and pre-menu boards, operators can deliver an enhanced, personalized customer experience with less friction.
Combat order inaccuracy by training team members to repeat the customer’s order. It’s simple, but it can ensure accuracy and alleviate consumer concerns.
Staffing is tough in today’s tight job market, but no one benefits from poor customer service. Operators should aim to staff a site appropriately and retain staff with better benefits, work/life balance, flexibility and opportunities for advancement.
As consumers grapple with inflation, restaurants must grapple with price sensitivity, becoming more strategic with price increases and discount approaches.